Cleveland Fed policy analyst Ann Marie Wiersch and visiting scholar Scott Shane, the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University, write that in the fourth quarter of 2012, “the value of commercial and industrial loans of less than $1 million — a common proxy for small business loans — was 78.4 percent of its second-quarter 2007 level, when measured in inflation-adjusted terms.”

And despite an increase of nearly 100,000 small businesses over the period, “the number of these loans dropped by 344,000 over the 2007 to 2012 period,” according to the study. (Many such loans go to small businesses.)

So what's happening here? Ms. Wiersch and Prof. Shane have some theories on the credit squeeze. Among them:

Fewer small businesses are interested in borrowing due to soft demand for their products and services;

Small business financials have remained weak, depressing loan approval rates;

Declining real estate prices have lowered collateral values, limiting the amount small business owners can borrow;

Banking industry consolidation has reduced the number of small banks, which are more likely to lend to small businesses; and

Small business lending has become relatively less profitable than other types of lending, reducing bankers' interest in this market.

They conclude that this “confluence of events makes it unlikely that small business credit will spontaneously increase anytime in the near future. Given the contribution that small businesses make to employment and economic activity, policymakers may want to intervene to ensure that small business owners can access the credit they need to operate effectively.”

No longer nimble

Prof. Shane is keeping busy, as he's also the author of this SmallBizTrends.com piece on small business employment, which he says “has grown more slowly than big business employment since the end of the Great Recession.”

That wasn't supposed to happen, he notes, as conventional wisdom holds that “small business employment declines more in economic downturns, but rises more in economic expansions. Small companies, the argument goes, are more nimble, making their employment decisions more responsive to economic conditions.”

But the pattern “has broken down over the past two decades,” Prof. Shane writes.

From the piece:

During the long expansion from 1991 to 2001, small business boosted employment by 17.4 percent, while big business increased employment by 33.4 percent, nearly twice as much. Then in the recession of 2001, companies with 500 or more employees cut employment by 2.7 percent, much more than the 1 percent decline at small businesses, and counter to what most economists would have predicted.

During the 2001 to 2007 expansion, big business increased employment by slightly more than small business (5.8 percent versus 5.6 percent). Finally, while small business shed jobs at a higher rate than big business during the Great Recession (7.4 versus 5.8 percent), small company employment rebounded less during the subsequent recovery (0.9 percent versus 1.2 percent) than conventional wisdom would have suggested.

Prof. Shane is not yet certain why this is happening, noting “I don't have the evidence to evaluate the impact of technological change, a shift in the regulatory environment, different credit conditions or any of the multitude of other factors that policy makers and pundits say is responsible.”

But the “nimbleness hypothesis” clearly appears to be a thing of the past.

Raise a glass

She's Mary Martineau, a Cleveland native who currently works as director of marketing for the lively North Market in Columbus, according to a blog post on Ohio.com. She is expected to begin work Sept. 3 for the association.

Ms. Martineau said in a statement that she has “a passion for championing and promoting small, local businesses and I am excited to represent the craft brewers of the great state of Ohio on local, regional and national platforms."

Ohio.com notes that the state's craft beer industry “has been growing quickly over the last several years thanks to the increasing popularity of craft beer nationwide. There were nearly 50 craft breweries in 2011. Today, there are more than 80, ranging from powerhouse Boston Beer Co. in Cincinnati to tiny nano operations such as MadCap Brew Co. in suburban Akron.”

The association, founded in 2008, has more than 30 members. Ohio.com reports that Ms. Martineau was selected from 45 candidates who applied for the position.

She worked as a small business owner in Columbus before being hired as the executive director of the Short North Business Association, according to the story. She has been with the North Market for eight years and is the founder of the North Market's Columbus Microbrew Festival, Ohio.com reports.

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